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In this short article we will explain some important steps to take when filing taxes as related to payments that your business has processed for the prior year.
What Does a Business Owner Need to Accurately Report to the IRS?
Both your bank and payment processing provider will provide a report of gross annual payments processed to you and the IRS. This is reported on Form 1099-K. Make sure you obtain this form on time to file your taxes.
What is Being Reported to the IRS?
Any transaction where a card is accepted as payment is recorded and counted in the gross annual payment amount. All transactions your business received in the past year are included.
Do Not Pay Tax on Revenue You Did Not Actually Receive
If your business issued a refund or has incurred a chargeback, make sure your bank does not declare that revenue on your Form 1099-K.
Penalties for Mishandling
Businesses that fail to provide correct information in a timely manner could be placed on backup withholding on up to 28% of all volume submitted until a correction is made.
Tips on Payment Reporting
- Review and Reconcile Regularly
- Businesses should update their accounting and bookkeeping practices and review returns submitted by the bank. Regularly reconciling documents will minimize your efforts during tax time Keep Track of Chargebacks, Fees and Refunds
- Legally, banks must report gross receipts, however chargebacks, fees and refunds must still be tracked as they will affect your tax liability
PolyPay as a Payment Processing Provider
At PolyPay, we are happy to review your statements in order to identify data discrepancies and cost-saving opportunities. Developing and maintaining clear and consistent reporting now will benefit you and your business in the long run.